NORTH SOUTH UNIVERSITY
MGT489
Strategic Management
Section 03
Group 07
Case Study-02
Submitted To:
Shabnin Rahman Shorna (Srs2)
Senior Lecturer
Department of Management
Submitted By:
Sl. Student Name Student ID
No
1 MD Foysal Ahmed 1913105030
2 Prova Das Ratry 2022269630
3 Jannatul Ferdous 2031262630
4 Araf Ahmed 2021968030
5 Nishat Tasnim Sajuti 2132312030
1. From an economic perspective, was the shift to a free-trade regime in the textile industry
good for Bangladesh?
Free trade means countries can buy and sell goods and services without too many taxes rules and
regulations. This free-trade setup was a bit of an ambiguous word when embarking on the textile
world in Bangladesh.
For this, factories appeared suddenly everywhere, and as a result, there was a huge demand for
cheap labour. This helped many out of extreme poverty and created many jobs and money. It
stimulated their economy to a better position and for that reason, they played a crucial role in the
global clothing market.
On the other hand, that growth came at a cost. Lowering expenses can’t be the goal of an industry.
It causes a lack of security, long working hours, and unsafe workplaces and buildings. In
Bangladesh, the Rana Plaza Tragedy was a disaster and a tragic example of this. Dependency on
only one industry can make a country vulnerable to its economy.
As can be seen, it boosted the country's development, on the contrary, it generated a practice where
profits sometimes came before the safety of people and their well-being. So from an economic
perspective, it is a complex picture, not a simple yes or no for shifting to the free-trade regime in
the textile industry, whether it is good or bad for Bangladesh.
2. Economically who benefits when retailers in Europe and the United States source textiles
from low-wage countries such as Bangladesh? Who might lose? Do the gains outweigh the
losses?
The garment industry globally is heavily embedded in low-wage countries like Bangladesh,
therefore benefits as well as drawbacks. Western countries can have cheap clothing. Retailers are
making money from the apparel business for sure. This helps the economy of Bangladesh, which
heavily depends on garment exports for job creation and economic growth. Despite the low salary
numbers, a lot of people get jobs that otherwise might not be available to them (particularly
women). But that also comes with a lot of problems. Unsafe factories, low wages, and fewer labor
rights —The catastrophe of Rana Plaza collapse on 24 April 2013 killed over 1,100 workers
exemplifies the struggle to achieve a balance between profits and safety regulation.
Textile jobs in Western countries like the U.S. and Europe are being lost to overseas production,
where millions of workers are losing their jobs in what will remain an ever-smaller industry. It is
economically beneficial, to an extent (falling prices and so the cost of consumer goods rise)
because of outsourcing and producing clothing in countries like Bangladesh.
The ethical issues are real. Fast fashion equates to long hours spent in unsafe working conditions,
and massive environmental impact on local populations. The problem is not whether the positives
outweigh the negatives, but how long they can equitably sustain this model. Possible solutions,
such as enforcing safety standards and fair pay could improve the circumstances. Cheap clothes:
Consumers and companies need to realize the true price of what is available in everyday shopping.
If we do not get this awareness, worker exploitation will still occur leaving the most isolated in
need.
Low-cost production of the global garment industry tends to make an intricate web of all winners
and losers because countries like Bangladesh are the backbone of it all. On the benefit side,
consumers in developed countries benefit from drastically reduced clothing prices and purchasing
power as well; major retailers (Walmart, H&M, Gap, larger profit margins & market
competitiveness brought on by decreased production costs. The garment industry is the single
largest source of export earnings for Bangladesh, generating nearly 84% and employing roughly 4
million workers (mostly women without other job opportunities.) The industry is also responsible
for growth in support sectors such as fabric and accessory manufacturing. What's more, global
supply chains create a degree of security services by way of reduced China dependency, following
the risks we see in increasing wage-related protests.
Nonetheless, it carries high costs associated with this economic arrangement. This leads to job
losses and wage suppression of workers in developed countries as textile manufacturing slowly
goes outsourced, causing knock-on effects on local industries. The garments industry has been no
exception in Bangladesh, as garment workers labor in dangerous facilities such as Rana Plaza fell
to the ground and earned a hair (at a meager wage of only $50–$60/month) far below the living
wage. Poorly regulated factories, struggling infrastructure like a congested roadside, or scarce
electricity provision in local communities incur environmental damage on top of already crowded
urban regions. Retailers also owe their reputation in the land to labor abuse, such as when Disney
was ejected from Bangladesh after the Rana Plaza catastrophe. The unambiguous human and social
costs aside, such a global supply chain model that has generated massive economic benefits is
profoundly unsustainable.
3. What are the causes of the weak safety record of the Bangladesh garment industry? Do
Western companies that import garments from Bangladesh bear any responsibility for what
happened at the Rana Plaza and other workplace accidents?
Causes of the weak safety record:
Poor Enforcement of structure and Safety Regulations: There were several safety code
violations in the construction of Rana Plaza, the structure that housed the garment factories.It was
originally approved for five stories but illegally added three more. Besides, Construction was done
on a weak foundation over a filled-in pond, making the structure highly unstable. Even after visible
cracks appeared and warnings were issued, the factory was kept open, showing a lack of regulation
enforcement.
Corruption and Lack of Accountability: Factory owners and powerful individuals often evade
consequences for ignoring safety standards due to corruption and weak governance. Also
Inspections are either not done thoroughly or are influenced by political or business interests.
Pressure for Low Cost, Fast Production: Western buyers are always pressuring factory owners
to deliver big orders quickly and for the least amount of money. They frequently disregard safety
precautions, worker rights, and appropriate construction standards in order to satisfy these
demands, choosing instead to use less expensive but riskier substitutes.
Absence of Worker Rights and Representation: Employees frequently lack legal protections
and union representation. Additionally, many fear losing their employment if they speak out
against harmful conditions.
Low Pay and Desperation: Many workers are unable to decline hazardous job because they
receive extremely low pay, which might be as low as $38 per month. Despite obvious fractures,
workers were compelled to enter the building on the day of the Rana Plaza collapse out of fear of
losing their jobs.
Do Western companies bear responsibility?
Yes, Western companies share responsibility for these tragedies, even if indirectly. Due to
Bangladesh's incredibly low labor and production costs, many international fashion stores buy
their products from this country. By doing this, they foster a culture of extreme speed and cost-
cutting, where factory owners forego safety in order to satisfy stringent deadlines and pricing
requirements. frequently neglect to properly audit or monitor their supply chains, allowing
unethical behavior to persist undetected.
In addition, it wasn't until the Rana Plaza accident that several Western companies signed legally
binding safety agreements, and even then, some of them declined to do so. The continuation of
risky supply chain operations is facilitated by their lack of proactive oversight and unwillingness
to take part in worker welfare.
4. Do you think the legally binding agreement signed by H&M, Zara, Tesco and others will
make a difference? Does it go far enough? What else might be done?
The legally binding agreement signed by H&M, Zara, Tesco, and other retailers is a step in the
right direction as it enforces responsibility on companies to improve factory safety in Bangladesh.
The five-year agreement includes measures such as hiring independent inspectors, requiring
factory owners to make safety upgrades, and forming a governing board for transparency.
However, the agreement may not go far enough as it still relies on factory owners and suppliers to
implement safety measures, which may be difficult given the existing economic pressures and lack
of strict enforcement. To further strengthen worker safety, additional steps could include:
Ensuring financial assistance for factories to improve their infrastructure.
Introducing stronger legal consequences for factory owners who violate safety regulations.
Establishing a workers’ union with proper representation to voice concerns.
Regular and independent audits of factories with strict penalties for non-compliance.
5. What do you think about Walt Disney’s decision not to purchase merchandise from
Bangladesh? Is this an appropriate way of dealing with the problem?
Walt Disney's decision to cease purchases from Bangladesh was an important and symbolic step,
but whether it was the best way to address the issue is uncertain. Here is a summary of the
implications:
Causes supporting Disney’s Decisions:
1. Morality and Ethical position: Disney withdrew from an industry rife with harmful working
conditions, emphasizing to stakeholders that it values basic rights over low-cost
production.
2. Managing Risks: Disney avoided possible culpability in the event of future catastrophes
and harm to its brand by pulling out.
3. Impact on Bangladesh: The action warned the Bangladeshi government and apparel sector
that poor labour conditions would have a negative economic impact.
Criticism of Disney’s Decision:
1. Harming the Wrong People: It's possible that Disney hurt garment workers more than
factory owners when it withdrew. There were few other employment options for many of
these workers, particularly women.
2. Lack of Influence: By separating, Disney lost influence that could have been utilized to
advocate for safety reforms within.
3. Avoiding solving the root causes: The real issue in Bangladesh was a lack of labour
legislation and oversight, which necessitated collaboration among merchants, the
government, and labour groups rather than withdrawal.
Different Approaches
Instead of pulling out, Disney could have launched industry-wide safety initiatives (such as the
legally enforceable agreement struck by H&M and Zara). Furthermore, they could have invested
in plant improvements or linked contracts to safety enhancements. Moreover, advocated for stricter
labour rules and greater transparency in supplier chains.
6. What do you think of Wal-Mart’s approach to this problem? Is the company doing
enough? What else could it do?
Wal-Mart’s approach to addressing the safety issues in Bangladesh’s garment industry has been
criticized for being insufficient. Instead of signing the legally binding agreement, Wal-Mart
proposed that retailers should voluntarily enforce safety measures and risk being expelled from the
supply chain if they failed to comply. This approach lacks enforceability and transparency, as it
does not hold companies legally accountable.
Wal-Mart could do more by:
Committing to a legally binding agreement to ensure worker safety.
Increasing its investment in safety training and factory improvements.
Working directly with factory owners and labor groups to improve wages and working
conditions.
Enhancing supply chain transparency by publishing factory inspection reports and safety
ratings.
By taking these additional steps, Wal-Mart could better contribute to long-term improvements in
Bangladesh’s garment industry.
